Last Updated: Tuesday, 10 December 2002
Capitalism: An economic system full of contradictions
By Olley Maruma
IN the late 19th Century, the chief author of the Communist Manifesto, Karl Marx,
argued that the contradictions of capitalism would one day destroy the capitalist
system.
His predictions were followed by two world wars in the first half of the 20th
Century. The 1914�1918 First World War was followed by a Marxist-Leninist
revolution in Russia in 1917 and the 1939-1945 Second World War was followed
by a Maoist Revolution in China in 1949. The Great Depression in the West in the
1930s seemed to indicate that Karl Marx had been right.
But there is something paradoxical about an economic system which is based on
the law of the jungle, euphemistically referred to as "the market forces of supply
and demand".
It goes through periodical crises, in which it leaves behind a lot of casualties, but
the basic pillars of the system always remain intact. Because of the attraction of
human greed, the system is also always able to spawn up demagogic disciples
who revive its fortunes by telling us that any economic system which does not
take into account human selfishness and individual flair and creativity in its
objectives is bound to fail.
A couple of years after the end of the First World War, Britain plunged into a
depression, which lasted for 20 years. Between 1921 and 1940, unemployment
never fell below a rate of 10 percent. During the Great Depression of the 1930s,
unemployment in Britain was over 20 percent. These days, unemployment of over
10 percent is quite acceptable in countries like Germany.
Through the New Deal, which relied on public expenditure to stimulate domestic
growth, President Roosevelt was able to reduce the economic misery and mass
unemployed that had become the order of the day in the United States.
In Britain, the end of the Second World War brought about the birth of the
"Welfare State" and the nationalisation of strategic industries such as gas,
electricity and the railways under the leadership of Clement Attlee and Ernest
Bevin, the new leading lights of the post-war Labour Party.
Economic thinking in the Labour Party was heavily influenced by the theories of
John Maynard Keynes, which were articulated in The General Theory of
Employment, Interest and Money.
In the book, Keynes advocated the use of government fiscal and monetary policy
to adjust demand and maintain full employment without inflation. Keynes later
helped to establish the International Monetary Fund and the World Bank in the
belief that these international institutions would do for the whole world what his
theories had done for Britain. From the 1940s to the 1960s, unemployment in
Britain dropped to less than 5 percent.
In Europe, the American government introduced the Marshall Plan, a programme
of US economic aid for the reconstruction of post-war Europe. These programmes
of massive public expenditure to stimulate domestic growth and to create
employment culminated in the liberal capitalism of the United States in the 1950s
and 1960s.
Unfortunately, Keynesism was not able to remove the scourge of inflation and by
the late 1970s, laissez faire capitalism was back in vogue. Thrown into panic by the
continuing spectre of inflation, which ate into savings and forced Britain to seek
balance of payments support from the IMF in the 1970s, even the working classes
deserted the Labour Party for conservative rule under Margaret Thatcher. Under
her new policies of Thatcherism, the new British Prime Minister promised to slash
public spending and to introduce fiscal discipline by imposing wage freezes and
keeping a tight lid on the money supply.
In the United States, it was the era of conservative Republican rule under
Reaganomics. Ronald Reagan was another enthusiastic disciple of Milton
Friedman.
Today, Britain has got very stable macro-economic fundamentals, but her public
services have gone to the dogs. The National Health Service, which was
established by the Labour Party after the Second World War, is crumbling.
Chancellor of the Exchequer, Gordon Brown, has pledged to borrow 70 billion
pounds in the next five years to bring back the country�s social services to an
acceptable state.
Thatcher was a disciple of Milton Friedman, whose economic theories were a
throw back to the 18th Century philosophy of free-market thinkers like Adam Smith
and Thomas Malthus. The only significant difference was that "free international
trade" had been given a new name, "global capitalism".
Friedman and his followers insisted that the world historical movement called
globalisation has a momentum that is inexorable. Those who do not adapt to its
demands will fall and be left behind. Well, twenty years is a brief period in the
evolution of the economic and political problems of the real world.
It is more than 20 years since the free market champions of globalisation started
dominating conventional thinking in economics. Those of us who were sceptical
of the efficacy of their theories in those days were dismissed derisively as
"socialist dinosaurs". But in five to ten years time, the socialist dinosaurs may well
be back in vogue again.
In Europe, disillusionment with the policies of the traditional centre right parties is
pushing the working classes into the hands of the fascist right wing, as happened
in Germany in 1933. In the Netherlands, Pim Fortuyn would have become Prime
Minister if he had not been assassinated.
In France, Jean Marie Le Pen got more votes in the presidential elections than
Lionel Jospin, the Socialist candidate. In Austria, far- right leader Jorg Haider got
27 percent of the votes in 1999. This year his share of the voted slumped to 10
percent.
While in Europe the poor and the marginalised are now turning to the far right,
who are xenophobic and anti-immigration, for salvation, in Latin America the
growing trend is to turn away from conservative, US-approved candidates and
neo-liberal policies.
Recently, Ecuador elected Colonel Lucio Gutierez, yet another Latin American
president with a left-wing agenda. Two years ago, Gutierez was in jail. His victory
in the presidential elections came after Lula da Silva�s landslide victory in Brazil.
Besides Brazil and Ecuador, Peru and Bolivia also voted for left-wing leadership. It
was a clear indication that Latin American voters, especially the indigenous
populations, were fed up with the neo-liberal policies that have been foisted on
them by the IMF and the World Bank in the last 20 years.
In Venezuela, there is also the left-wing President Hugo Chavez, another left-wing
army officer who the Americans have tried to topple in at least one military coup.
The choice for Ecuador�s 12 million people was between Colonel Gutierez, a career
soldier accused by his opponents of being a communist, and Alvaro Noboa, a
banana billionaire, who had promised to turn his country into an "empire" of
wealth.
Colonel Gutierez is from a low middle class family in the Amazon region. He came
to public attention in 2002 when President Jamil Mahuad decided to change the
country�s currency into the US dollar, as Argentina had done. This led to violent
demonstrations and the replacement of Mahuad with a triumvirate that included
Colonel Gutierez, with the backing of the indigenous people and junior army
officers.
Their rule was short-lived. US- backed vice-president Gustavo Noboa took over
power and Colonel Gutierez was sent to military prison for six months. Now he is
back as his country�s president, with the full mandate of his people.
How will the United States react to these developments? What will the future hold
for the people of Latin America? Only time will tell. To be sure, the sub-continent�s
new socialist leaders will have to undertake some agrarian reform to economically
empower those who are currently marginalised by a skewed land tenure system,
which is legacy from the colonial past.
As for those who are imposed on their people through American military might,
things are not looking too good at the moment. Hamid Karzai, the president of
Afghanistan, is the most vulnerable head of state in the world.
Al-Qaeda would like to kill him. Rival warlords, who control much of the country,
also want him dead. In September, President Karzai survived an assassination
attempt in the southern city of Kandahar, when a gunman opened fire on his
limousine. His United States military bodyguards foiled the attack.
Since then, Mr Karzai is now using a private security company managed by
officers of the US State Department�s diplomatic security service. On the day that
Dyn-Corp, the private security company took over, the vice-president and defence
minister Mohammad Qasim Fahim survived an attempt on his life in Kabul by a
would-be suicide bomber.
According to news reports, Afghan security officials said the original target of the
suicide bomber had been Mr Karzai. His absence while in the United States
scuppered the assassination plan and Al Qaeda turned its attention on the
vice-president. Now if this is not neo-colonialism, will someone who knows please
tell me what it is.
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"Ivinicus factus sum veritabem diceus." ( I have become an enemy for speaking the truth ) St Paul!
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Mitayo Potosi
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